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Tips to Reducing Ecommerce Inventory Costs

Last Updated on Sep 10, 2013 by Jenna Scaglione

InventoryInventory management – It’s a love-hate relationship.

You NEED it to remain organized but it cuts into efficiency and company growth strategies. What’s an Ecommerce store to do?

For one, reducing inventory costs is essential. When you learn how to reduce inventory costs, you will free up time and resources essential to maintaining your growth.

Last week, we discussed one of the strategies Ecommerce stores can implement to reduce inventory costs. In today’s post, we will explore additional strategies to help businesses increase profits as they take a closer look at inventory processes.

If you haven’t read last week’s article, you can access it here: Reduce Ecommerce Inventory Costs by Streamlining Processes

Here are some more tips to reducing inventory costs:

Divide Inventory

If you house physical inventory in a warehouse or other location, it costs money to keep product sitting around collecting dust.

Divide your inventory into three different categories (calculate the costs of keeping them in inventory):

1. The inventory that produces a positive profit margin

2. The inventory that allows you to break even but does not produce profit

3. The inventory that does not produce a profit, nor covers costs.

With a little research, you can monitor the high-selling products and optimize your inventory by carrying similar products and releasing the lower performers. This will also help you to organize and manage your inventory since you will become more closely acquainted with your products and the success or failure of each.

Don’t Forget to Plan

First-time store owners may get caught up in the product ordering process and overwhelm their inventory in a short period of time. This will suffocate time and resources and cut into gross profits.

Avoid acting on impulse. Devise a plan before you buy that includes criteria such as the types of products that sell, the rate at which you add new products, and other inventory management aspects. By ironing out the details of your plan before you buy, you will prevent unnecessary costs and inefficiency.

Tip: You may need to obtain a product sample before you order a shipment. A product may look enticing online, but not live up to its reputation when experienced in physical form. Jumping in too fast without seeing the product could damage your store’s reputation and cause inventory headaches later if the products are subpar. Request samples of the products before you offer them to ensure you are aware of the level of quality.

Vendor Communications

In last week’s article, we discussed streamlining vendor communication to improve efficiency in inventory management, thereby reducing costs. Much of this can be avoided if you perform proper research during the preliminary stages. Find out a vendor’s shipping and return policy and ensure it lines up with your policies. Reputable vendors will be transparent about their policies. This is especially important if you are a dropshipper. Whatever you promise for your store must align with your vendor’s policies.

Inventory management is a complex process, especially if you sell a large number of products. The best way to reduce costs is to cut time, and one of the best ways for Zen cart owners to accomplish this is to take advantage of a module like Numinix’s Product Variants Inventory Manager. If your store uses variants, this mod is a must have.


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